1. Field
The present invention relates to computer systems for assessing that mortgage lenders and brokers comply with lending regulations.
2. Description of the Related Art
Federal, state, and local mortgage industry regulators have an obligation to ensure that mortgage lenders and brokers within their regulatory jurisdiction obey all applicable laws. Regulators must monitor compliance and detect absence of compliance as well as active violations. In addition, as part of civil court settlements or judgments and criminal plea agreements or criminal convictions, certain mortgage lenders and brokers may consent to additional monitoring by regulators or other outside parties.
These regulators are often charged with enforcing a wide variety of anti-discrimination laws, anti-predatory lending laws, licensing laws, privacy laws, as well as other laws and regulations. These laws require regulators to check, for example, whether mortgage rates and terms given to some consumers are materially less favorable than the most favorable terms available to a substantial portion of consumers, whether the loans offer net tangible benefits to borrowers, whether loan programs are suitable to the borrowers' wants and needs, and so forth.
Numerous existing commercial software programs check for mortgage related compliance of 300 or more federal, state and local statutes related to but not limited to; maximum charges, loan pricing, maximum fees and points (usury), annual percentage rate (APR), loan size, risk based pricing, allowance or disallowance of prepayment penalties, maximum dollar amount or percentage of allowable prepayment penalties and allowable timelines, required disclosures provided to borrowers, licensing, and jurisdiction-based allowable loan products or jurisdictional-based loan restrictions.
However, many of the existing compliance software programs/engines are usually rule based, not scorecard based and not intuitive in its artificial intelligence. The difference between a rule based approach and a scorecard based approach can be illustrated in a simple example of a police department that has a hiring requirement that recruits have to be at least 5′0″, not weigh more than 250 lbs., and have no felony convictions. A rule based program will affirm compliance for a recruit that is 5′0″, 249 lbs., and has 3 convictions for misdemeanor drunken driving. A scorecard based program will assign certain numerical values for each category of eligibility/deficiency/allowance/requirement/standard. Intuitively, the example recruit is not an ideal candidate, and as such the scorecard based program will likely reject him.
Currently, each lender or broker uses its own propriety software and internal business process in its loan underwriting/decisioning process. The entire process offers little transparency and there exists no simple way to determine whether the lender or broker is in compliance with the applicable regulation. In addition, regulators have limited time and resources to monitor compliance and investigate suspected non-compliance in lenders or brokers within their jurisdiction. Therefore, regulators need faster, more efficient, more cost-effective ways to perform all of their duties or monitoring, preliminary analysis, and full investigations.